FBC Manby Bowdler LLP
FBC Manby Bowdler LLP are a Made in the Midlands Patron Member
The decision by the High Court earlier this year to allow Rolls Royce to essentially buy its way out of potential prosecutions for bribery and corruption, may lead some corporates to believe that money talks and that it can be used to wriggle out of potentially costly and reputation damaging legal cases. However, as Elisabeth Glover of FBC Manby Bowdler’s specialist Regulatory and Business Crime team explains, there’s a lot more to this case than initially meets the eye.
Rolls Royce, a bastion of British industry and a marque associated with quality and prestige, suffered a blow to its reputation when it was announced that it had operated in a way that supported bribery and corruption over a period of 24 years.
Yet earlier this year, they were offered a Deferred Prosecution Agreement (DPA) by the Serious Fraud Office (SFO) which, so long as they comply with the specific conditions agreed, will exempt the company from prosecution relating to these charges.
However, with an associated price tag amounting to £497m in UK fines and charges, any company thinking that the Rolls Royce case is one to be copied would do well to first do their homework.
Simply, DPAs are not raffle tickets that the SFO hands out lightly. In making its decision to take this course of action, it will have considered what was in the best interests of justice; how cooperative the company in question was; the steps being taken to ensure future compliance through changes to the corporate culture and leadership; and what other implications, including those of cost, bringing a prosecution could lead to.
When the DPA was offered to Rolls Royce, it was done so in the knowledge that whilst the offences were extremely serious, Rolls Royce had themselves played a major part in the investigation and their own internal investigation had, in fact, uncovered considerably more wrong-doing than was originally alleged – something which they provided full disclosure of.
Rolls Royce additionally put in place stringent new compliance procedures; conducted disciplinary proceedings in respect of 38 employees and entirely changed its personnel at Board and Senior Management level.
Had the DPA not been agreed and a conviction been secured, it is highly likely that Rolls Royce would have been unable to continue trading. This would have had a far greater impact on the UK defence sector and wider economy, as well as costing the UK tax payer, than was deemed appropriate.
Simply, the level of cooperation demonstrated by Rolls Royce and the costs that they incurred were such that, when viewed alongside the improvements to corporate governance that had been introduced, it was deemed that they simply could not have done any more.
This was only the third DPA to ever be authorised and the SFO has indicated that it will be more prepared to consider them in the future. This should not, however, be taken as a ‘get out of jail free’ card for any company or organisation facing such allegations.
Of course, the best advice any business can take from the Rolls Royce case is simply to not commit bribery or corruption offences in the first place! Should your company, however, find itself facing such allegations - whether well-founded or not – it is vital to treat them with the utmost gravity and immediately launch a full and thorough internal investigation. Cooperation with the authorities is an absolute must and you should be prepared for a comprehensive change to your business’s culture and personnel.
Whilst Rolls Royce found itself facing these charges due to likely malpractice over several decades, its cooperation, willingness to self-investigate and the introduction of radical improvements (not to mention significant financial penalties) were what ultimately saved it from its likely demise.
All corporates would do well to remember this.